Texas CREZ transmission

This page is supplementary material to the post “Electricity in Texas part II – the cost of a 100% renewable grid” on Climate etc.

Texas CREZ transmission network $10.1 / MWh.

The Texas CREZ (Competitive Renewable Energy Zones) network covers areas which are generally good for both wind and solar PV resources. The design and cost of this network is not a simple matter, particularly with the options for siting large quantities of storage in different places. Hence the network is not included at all in the grid hourly simulation and the cost model takes a simple conservative view of capacity and cost. The network transmission LCOE estimates are not especially high cost contributions to the overall average LCOE, so the exact assumptions are not that critical.

The grid hourly simulation shows a -22% (negative) correlation between Texas CREZ-region wind and solar PV. Both can share the same high-voltage transmission network with minimal contention and curtailment caused by interference between them. This can be verified by playing with the Texas grid hourly simulation spreadsheet. Provision of storage in the CREZ regions, at the generation end of the transmission lines, will also minimise this interference.

For the purposes of costing a simple view has been taken. The nominal network capacity has been configured to the solar PV nameplate capacity of 80 GW – the larger of the wind (75GW) and solar PV (80 GW) nameplate capacities.

“The total CREZ cost was $6,900m. Before the development of CREZ, there were 6,903 MW of wind installed power. The development of CREZ allowed a total installed wind power in West Texas of 18,456 MW. Therefore the $6,900m allowed the development of additional 11,553 MW of wind.”

The CREZ LCOE contribution for supporting 80 GW of solar PV is thus based on $6.9bn for 11.5 GW of transmission capacity. The capital required is converted to an average LCOE CREZ transmission contribution across all generation over a 30 year transmission line lifetime at the default cost of capital of 6%.

The way the capital cost of 6% is factored into the calculations is to reduce the actual lifetime using a spreadsheet financial function to get a discounted (and always shorter) lifetime such that

total capital cost per year = capital requirement / discounted lifetime in years

A couple of examples might help to understand the discounted lifetime approach. First, if you set the cost of capital to zero, then all discounted lifetimes trivially become the same as the actual lifetimes, so the annual capital costs are what you would intuitively expect (capital requirement/lifetime in years). Secondly, setting the actual lifetime infinite (or just very high) but keeping the cost of capital at 6% the maximum discounted lifetime you can get is 16.67 years (which is 100%/6% in years) representing just interest-only payments. So all discounted lifetimes have to be shorter than 16.67 years.

The CREZ transmission lines have an expected lifetime of at least 30 years and the discounted lifetime thus becomes 13.7 years. The annual capital and interest repayment amount is then divided by a year’s MWh of demand (39,500 MW x 8760 hours) to calculate the average LCOE contribution for each supplied MWh. This works out at $10.1 / MWh.

$10.1 / MWh is lower than it might have been for two reasons. Firstly the CREZ lines will be shared between solar PV and wind generation, enabling a higher capacity factor than the current CREZ network which transmits only wind power. Secondly the distances involved are relatively modest – 300-400 miles. Compare this with the California plan to obtain cheap wind power from the Great Plains states – the TransWest Express transmission line is 700 miles long.

Some of the longer-distance CREZ transmission capacity might end up as HVDC (high-voltage DC) lines to improve grid stability rather than to reduce line losses (the normal reason for using HVDC lines).

No reduction to the estimates has been made for future technology advances, nor for the fact the expansion will mainly involve extensive upgrades to the existing routes.